CALN — Coatesville Area school board members unanimously approved refinancing its 2006 general obligation bond and repaying possibly more than $4 million to Municipal Revenue Services (MRS) for the sale of delinquent taxes.

School board members have the option to save the school district more than $600,000 on one issued bond used for refunding projects and help eliminate a massive debt owed because of the sale of delinquent taxes.

The school board could approve an investor to refinance the 2006 general obligation bond, “or pull the plug if it’s not enough savings,” school board member and chairman of the finance committee Rick Ritter said.

“It doesn’t make sense if you are not saving” and by paying off what’s owed to MRS would “get us across the hump until we can rebuild our fund balance,” Ritter said.

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According to Ron Kabonick, the school district’s director of business administration, the school district is expected to owe $4.2 million to MRS and is currently $1.4 million in deficit.

The school district banned the sale of delinquent tax claims in February. Before that, Kabonick said the school district would receive a “predetermined amount of cash in advanced.”

The school district sold millions in delinquent property tax claims to The Harrisburg Authority from 2005 to 2008, and in the following years to a Girard-based nonprofit, Northwest Pennsylvania Incubator Association.

The deal between The Harrisburg Authority and the school district, as well as the deal between Northwest Pennsylvania Incubator Association was brokered by MRS.

The repayment of debt owed to MRS would come from a portion of the school district’s unfunded actuarial accrued liability, or the UAAL project — shifting money from the Public School Employee Retirement System’s unfunded liability of contribution debt.

Unfunded liability is calculated by PSERS. Kabonick said school employees who retire are drawing more out of what is being contributed and the percentage of employee contribution will continue to grow.

According to PSERS data on employer contributions to an employee’s health care and pension, member contribution ranges from 5.25 percent to 10.3 percent of payroll. The employer pays about 21.4 percent in 2014-15, an increase of about 4.5 percent from 2013-14.

Repaying the funds used from PSERS unfunded liability would be complete in 2 to 3 years. The amount owed could change over time since the liability of additional interest could increase what is owed, Kabonick said.

“As taxes are collected (by the Chester County Tax Claim Bureau) and forwarded over to the school, uncollected taxes from 1991 to 2012 are due to MRS, and 2011 on is due to the school district. We need to keep track of that.”

Kabonick said refinancing the 2006 bond for $8.35 million is “purely to save money.” It would be paid off by 2019-20 school year, saving the district more than $647,000 – that’s if the market does not change.

“The rates today are not the same as the rates in April,” he said. “(The chart) shows the best estimation based on current rates.”

Gary Pulcini, president of Ligonier-based VALCO Capital Ltd. and the school district’s appointed financial advisor, presented a few options on a chart for the school district to observe.

Kabonick said the school district would most likely look at the option that would save the district $144,710 in the first year; $34,000 in the second and $30,711 in the third year.

The next step is for Pulcini to reach out to investors to see what rates are available.

The school board would have to approve or deny moving forward with refinancing the bond based off of current rates presented by Pulcini.

However, refunding what is owed to MRS is an unavoidable option since the school district has decided “to get out of the tax lien sales,” Kabonick said.

About the Author

Kristina Scala, a Brooklyn native and 2012 graduate of Rowan University, started working for the Daily Local News in August 2013. She covers Coatesville Area School District, Coatesville City and municipalities associated with the school district. Reach the author at KScala@dailylocal.com
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